We’re in the midst of a “silver tsunami" of aging baby boomers who own businesses and are looking to retire. It’s a great time to buy a business. Many business owners over 65 are thinking about handing it down to someone else upon retirement, like their own children or an apprentice. Still others will simply turn the lights out for want of a qualified buyer and these scenarios present opportunities for aspiring entrepreneurs. There will be some motivated sellers out there who will be willing to finance some portion of the purchase price via seller financing. 

Buying an existing business is a great way to leapfrog past all of the costs and risks of starting a new business from scratch.  If the idea of buying a business appeals to you, you might be asking where to do you start and how do you know which business is the right opportunity for you?

The journey to find and purchase the ideal business can be a daunting task for individual buyers. The process is often plagued by time-consuming searches through numerous listings.  If your approach is to scour endless listings in the hope of stumbling upon a suitable business, you’ll waste a ton of time and likely fail.  Seasoned buyers understand the importance of focusing on specific fundamentals that a business must possess, streamlining their search process significantly.

To optimize the search for the right business, it is imperative for buyers, particularly those lacking experience, to adopt a more strategic approach. By identifying clear criteria and focusing on essential fundamentals from the outset, buyers can efficiently narrow down their search to businesses that align with their objectives. This targeted approach not only saves time but also minimizes frustration by eliminating unsuitable options early in the process.

When it comes to purchasing a business, there are several important factors that must be taken into consideration in order to ensure a successful investment. Here are five suggestions on how to select a business to purchase:

1. Passion

You might focus your search on industries that match your passions. It’s ideal if you’re passionate about the industry in which the business operates. If you are, it’s more likely you’ll be willing to see it through when the going gets tough. Although passion is important, it should not override your related experience and skills. You may have always dreamed of owning a restaurant and have a passion for cooking.  But if you have a knack for logistics, you may be better off purchasing a delivery company.

2.  Element of Exclusivity

Businesses that have some type of exclusivity, either in the products or services they sell (something somewhat unique) or in the geographic area it services typically have a greater chance of succeeding. 

3.  Potential for Growth

Consider why you want to purchase the business. Are you happy keeping things exactly as they were? Is the company as profitable as you want it to be? Most people buy businesses in hopes of growing them into something more. If that is the case for you, you will want to take a close look at the company’s potential for growth. For example, buying a beer distributor may not offer much in the way of upside potential given that there are so many more retail outlets competing for the same business.  If the potential is limited, it may not be worth your time and money.

4. Reputation and Customer Base

The reputation and customer base of a business can significantly impact its success and profitability. Research the business’s reputation within the industry and among its customers to determine whether it has a strong brand presence and loyal customer base. Additionally, consider whether there are opportunities to expand the customer base or improve customer retention.

5. Legal and Regulatory Compliance

It is essential to understand the legal and regulatory requirements relating to the business. Some businesses are more highly regulated than others. Regulations mean more for you to understand and possibly more friction in running your business.  You might consider businesses that have a lower regulatory load.  For example, it’s been popular lately to operate a home health business because of the increasing need for those services. However, healthcare is a highly regulated industry full of rules and compliance requirements.  It can be lucrative but you have to know what you’re doing to ensure that the business is in compliance with all legal and regulatory requirements. A business that sells equipment and supplies to the landscaping industry in your area offers a lot less in the way of regulation and might be an easier lift for the inexperienced buyer.

By taking these five factors into consideration, you can make a more informed decision when selecting a business to purchase. Conducting thorough research and due diligence can help mitigate risks and increase the likelihood of a successful investment. If you have any further questions or need assistance with purchasing a business, do not hesitate to contact a qualified attorney for guidance.

Whether you’re new to buying a business, an experienced buyer, or an entrepreneur acquiring multiple businesses, Fiffik Law Group can help. Our aim is to make the process of buying a business as straightforward as possible.